India Motor Parts & Accessories Limited (NSE:IMPAL) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that India Motor Parts & Accessories Limited (NSE:IMPAL) is about to go ex-dividend in just two days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase India Motor Parts & Accessories' shares before the 6th of February to receive the dividend, which will be paid on the 14th of February.

The company's upcoming dividend is ₹10.00 a share, following on from the last 12 months, when the company distributed a total of ₹27.00 per share to shareholders. Based on the last year's worth of payments, India Motor Parts & Accessories has a trailing yield of 2.4% on the current stock price of ₹1106.55. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether India Motor Parts & Accessories can afford its dividend, and if the dividend could grow.

See our latest analysis for India Motor Parts & Accessories

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see India Motor Parts & Accessories paying out a modest 44% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (71%) of its free cash flow in the past year, which is within an average range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit India Motor Parts & Accessories paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, India Motor Parts & Accessories's earnings per share have been growing at 14% a year for the past five years. India Motor Parts & Accessories has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. India Motor Parts & Accessories has delivered an average of 16% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is India Motor Parts & Accessories worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, India Motor Parts & Accessories paid out less than half its earnings and a bit over half its free cash flow. India Motor Parts & Accessories looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in India Motor Parts & Accessories for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for India Motor Parts & Accessories you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.